Question 1

-Refer to the above table. The marginal utility of the 5th movie for Robert is

Accepted Answer

A)  400 units of utility. 
B)  50 units of utility. 
C)  60 units of utility. 
D)  70 units of utility. 
A)  400 units of utility. 
B)  50 units of utility. 
C)  60 units of utility. 
D)  70 units of utility.

Question 2

-Refer to the above table. In examining the utility schedules for Michelle and Robert, we can conclude that

Accepted Answer

A)  they like movies the same. 
B)  they like the third movie the same. 
C)  Michelle likes movies more than Robert does. 
D)  they both received the same satisfaction from watching the fourth movie. 
A)  they like movies the same. 
B)  they like the third movie the same. 
C)  Michelle likes movies more than Robert does. 
D)  they both received the same satisfaction from watching the fourth movie.

Question 3

If an individual's total utility from consuming two goods increases, then there must be

Accepted Answer

A)  a downward rotation of the individual's indifference curve. 
B)  an inward rotation of the individual's indifference curve. 
C)  an outward shift of the individual's indifference curve. 
D)  an inward shift of the individual's indifference curve. 
A)  a downward rotation of the individual's indifference curve. 
B)  an inward rotation of the individual's indifference curve. 
C)  an outward shift of the individual's indifference curve. 
D)  an inward shift of the individual's indifference curve.

Question 4

Because the behavioral economics approach suggests many alternative behaviors that people might exhibit if they fail to behave as if they are rational, this approach

Accepted Answer

A)  often fails to provide clearly testable behavioral predictions. 
B)  reproduces the same predictions as utility analysis. 
C)  has an over reliance on the rationality assumption. 
D)  ignores the possibility of bounded rationality. 
A)  often fails to provide clearly testable behavioral predictions. 
B)  reproduces the same predictions as utility analysis. 
C)  has an over reliance on the rationality assumption. 
D)  ignores the possibility of bounded rationality.

Question 5

A consumer has been buying 5 magazines and 2 books a month for many months. The price of books then increases. To attain a new optimum, the consumer will

Accepted Answer

A)  buy more magazines because they are now relatively more valuable than they were before, while continuing to buy the same number of books. 
B)  buy more books because they are now relatively more valuable than they were before. 
C)  buy the same number of books and magazines as before because they provide different types of utility. 
D)  buy fewer books than before because they are relatively more expensive than they were before. 
A)  buy more magazines because they are now relatively more valuable than they were before, while continuing to buy the same number of books. 
B)  buy more books because they are now relatively more valuable than they were before. 
C)  buy the same number of books and magazines as before because they provide different types of utility. 
D)  buy fewer books than before because they are relatively more expensive than they were before.

Question 6

-Refer to the above table. If the price of a hamburger is $2, the price of a Broadway Show is $60, and the consumer has $128, what is the consumer optimum?

Accepted Answer

A)  2 hamburgers and 2 Broadway shows. 
B)  2 hamburgers and 3 Broadway shows. 
C)  3 hamburgers and 2 Broadway shows. 
D)  4 hamburgers and 2 Broadway shows. 
A)  2 hamburgers and 2 Broadway shows. 
B)  2 hamburgers and 3 Broadway shows. 
C)  3 hamburgers and 2 Broadway shows. 
D)  4 hamburgers and 2 Broadway shows.

Question 7

If the budget line rotates, then we know that

Accepted Answer

A)  income has changed. 
B)  their has been a change in the consumer's tastes. 
C)  the price of one of the goods had changed. 
D)  the consumer was not maximizing their utility. 
A)  income has changed. 
B)  their has been a change in the consumer's tastes. 
C)  the price of one of the goods had changed. 
D)  the consumer was not maximizing their utility.

Question 8

In order for a consumer to choose between two different goods, he has to take into consideration the

Accepted Answer

A)  marginal utility of production. 
B)  marginal utility divided by the price. 
C)  marginal utility plus the price. 
D)  total utility divided by price. 
A)  marginal utility of production. 
B)  marginal utility divided by the price. 
C)  marginal utility plus the price. 
D)  total utility divided by price.

Question 9

-Refer to the above table. If a consumer's optimum consists of 3 magazines and 6 books, then

Accepted Answer

A)  the price of a magazine is six times more than the price of a book. 
B)  the price of a magazine is three times more than the price of a book. 
C)  the price of a book is more than five times more than the price of a magazine. 
D)  the price of a book is six times more than the price of a magazine. 
A)  the price of a magazine is six times more than the price of a book. 
B)  the price of a magazine is three times more than the price of a book. 
C)  the price of a book is more than five times more than the price of a magazine. 
D)  the price of a book is six times more than the price of a magazine.

Question 10

-Refer to the above table. If the price of a magazine is $2 and the price of a paperback book is $5 and the consumer has $19, the rational consumer will purchase

Accepted Answer

A)  2 magazines and 2 books. 
B)  2 magazines and 3 books. 
C)  5 magazines and 6 books. 
D)  6 magazines and 6 books. 
A)  2 magazines and 2 books. 
B)  2 magazines and 3 books. 
C)  5 magazines and 6 books. 
D)  6 magazines and 6 books.

Question 11

John is currently spending all of his income. For the last unit of Good A consumed John gets 20 utils and for the last unit of Good B consumed he gets 10 utils. The price of Good A is $10. The price of Good B is $1. If John wants to maximize his utility he should

Accepted Answer

A)  continue to purchase the same amount of Good A and Good B. 
B)  increase the consumption of Good A and decrease the consumption of Good B. 
C)  decrease the consumption of Good A and increase the consumption of Good B. 
D)  decrease the consumption of Good A and decrease the consumption of Good B. 
A)  continue to purchase the same amount of Good A and Good B. 
B)  increase the consumption of Good A and decrease the consumption of Good B. 
C)  decrease the consumption of Good A and increase the consumption of Good B. 
D)  decrease the consumption of Good A and decrease the consumption of Good B.

Question 12

A consumer has spent all of his funds on hamburgers and movies. The price of a hamburger is $1 and the price of a movie is $5. The marginal utility of the last hamburger is 5 and the marginal utility of the last movie is 40. This consumer has

Accepted Answer

A)  not maximized utility. To maximize utility, he should cut back on movies and buy more hamburgers. 
B)  not maximized utility. To maximize utility, he should cut back on hamburgers and buy more movies. 
C)  not maximized utility. To maximize utility, he should cut back consumption of each. 
D)  maximized utility. 
A)  not maximized utility. To maximize utility, he should cut back on movies and buy more hamburgers. 
B)  not maximized utility. To maximize utility, he should cut back on hamburgers and buy more movies. 
C)  not maximized utility. To maximize utility, he should cut back consumption of each. 
D)  maximized utility.

Question 13

Jill likes lobsters but she does not eat lobsters in every meal. How can utility theory explain this?

Accepted Answer

Even though Jill likes lobsters, she is

Question 14

If the price of X is $3 and the price of Y is $5, then, in a consumer optimum,

Accepted Answer

A)  the quantity purchased of Y must be 60 percent of the quantity of X purchased. 
B)  the quantity purchased of Y must be 67 percent of the quantity of X purchased. 
C)  the marginal utility of Y must be 67 percent more than the marginal utility of X. 
D)  the marginal utility of X must equal 3 and the marginal utility of Y must equal 5. 
A)  the quantity purchased of Y must be 60 percent of the quantity of X purchased. 
B)  the quantity purchased of Y must be 67 percent of the quantity of X purchased. 
C)  the marginal utility of Y must be 67 percent more than the marginal utility of X. 
D)  the marginal utility of X must equal 3 and the marginal utility of Y must equal 5.

Question 15

According to utility theory, consumer purchase decisions are made such that

Accepted Answer

A)  the value of the ratio of marginal utility to price for the last units purchased and consumed is equal. 
B)  the difference between the value of the marginal utility of the last unit purchased and the price paid is maximized. 
C)  the total utility of the last unit purchased is equal to the price of that unit. 
D)  the total utility from consuming the good is less than the marginal utility of the last unit consumed. 
A)  the value of the ratio of marginal utility to price for the last units purchased and consumed is equal. 
B)  the difference between the value of the marginal utility of the last unit purchased and the price paid is maximized. 
C)  the total utility of the last unit purchased is equal to the price of that unit. 
D)  the total utility from consuming the good is less than the marginal utility of the last unit consumed.

Question 16

The substitution effect refers to

Accepted Answer

A)  the law of diminishing marginal utility. 
B)  the want-satisfying power of a good or service. 
C)  substitution of less expensive commodities for more expensive commodities. 
D)  the change in purchasing power when the price of a good changes. 
A)  the law of diminishing marginal utility. 
B)  the want-satisfying power of a good or service. 
C)  substitution of less expensive commodities for more expensive commodities. 
D)  the change in purchasing power when the price of a good changes.

Question 17

-In the above figure, if the budget line is originally line DE and the price of coffee decreases, the consumer will

Accepted Answer

A)  drink less coffee and increase bagel consumption slightly. 
B)  drink more coffee and increase bagel consumption slightly. 
C)  drink more coffee and decrease bagel consumption slightly. 
D)  leave consumption of both coffee and bagels unchanged. 
A)  drink less coffee and increase bagel consumption slightly. 
B)  drink more coffee and increase bagel consumption slightly. 
C)  drink more coffee and decrease bagel consumption slightly. 
D)  leave consumption of both coffee and bagels unchanged.

Question 18

A consumer with unlimited income will continue consuming goods until

Accepted Answer

A)  the marginal utility of each is equal to zero. 
B)  the marginal utility of each is negative. 
C)  total utility rises. 
D)  marginal utility equals total utility. 
A)  the marginal utility of each is equal to zero. 
B)  the marginal utility of each is negative. 
C)  total utility rises. 
D)  marginal utility equals total utility.

Question 19

What is the marginal rate of substitution between two goods and how is it related to the indifference curve?

Accepted Answer

The marginal rate of substitution betwee

Question 20

-Refer to the above table. Suppose the price of a hamburger is $2, the price of a movie is $5, and the income of the consumer is $29. What will the consumer's total utility equal at an optimum?

Accepted Answer

A)  70 
B)  1025 
C)  1060 
D)  1118 
A)  70 
B)  1025 
C)  1060 
D)  1118

Exam 20: Consumer Choice

-Refer to the above table. The marginal utility of the 5th movie for Robert is

-Refer to the above table. In examining the utility schedules for Michelle and Robert, we can conclude that

If an individual's total utility from consuming two goods increases, then there must be

Because the behavioral economics approach suggests many alternative behaviors that people might exhibit if they fail to behave as if they are rational, this approach

A consumer has been buying 5 magazines and 2 books a month for many months. The price of books then increases. To attain a new optimum, the consumer will

-Refer to the above table. If the price of a hamburger is $2, the price of a Broadway Show is $60, and the consumer has $128, what is the consumer optimum?

If the budget line rotates, then we know that

In order for a consumer to choose between two different goods, he has to take into consideration the

-Refer to the above table. If a consumer's optimum consists of 3 magazines and 6 books, then

-Refer to the above table. If the price of a magazine is $2 and the price of a paperback book is $5 and the consumer has $19, the rational consumer will purchase

John is currently spending all of his income. For the last unit of Good A consumed John gets 20 utils and for the last unit of Good B consumed he gets 10 utils. The price of Good A is $10. The price of Good B is $1. If John wants to maximize his utility he should

A consumer has spent all of his funds on hamburgers and movies. The price of a hamburger is $1 and the price of a movie is $5. The marginal utility of the last hamburger is 5 and the marginal utility of the last movie is 40. This consumer has

Jill likes lobsters but she does not eat lobsters in every meal. How can utility theory explain this?

If the price of X is $3 and the price of Y is $5, then, in a consumer optimum,

According to utility theory, consumer purchase decisions are made such that

The substitution effect refers to

-In the above figure, if the budget line is originally line DE and the price of coffee decreases, the consumer will

A consumer with unlimited income will continue consuming goods until

What is the marginal rate of substitution between two goods and how is it related to the indifference curve?

-Refer to the above table. Suppose the price of a hamburger is $2, the price of a movie is $5, and the income of the consumer is $29. What will the consumer's total utility equal at an optimum?

The Nature of Economics

Scarcity and the World of Trade-Offs

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Extensions of Demand and Supply Analysis

Public Spending and Public Choice

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The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

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Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

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Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

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Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

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Environmental Economics

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